Goldman Sachs profits plunge as trading revenues dry up

Goldman Sachs profits plunged 52% in the last three months of last year as investment banking and trading revenues collapsed from the previous year's record levels.

The bank suffered a huge decline in demand from clients for bond and share-broking services. And a dearth of takeover deals and corporate fundraisings hit fees at its investment banking division.

However, income on investments made with its own money shot up 45% as the value of stakes it has taken in various businesses rocketed, mainly because of a rise in the markets during the period.

Last year Goldman was forced to pay a record fine of $550 million (£343million) to settle claims from Wall Street regulator the Securities and Exchange Commission over an investment product it devised with a hedge fund keen to bet against the housing market. Goldman salesman Fabrice "Fab" Tourre remains under investigation for his role in the affair.

The bank's reputation has been left further damaged this week by the fiasco over its fundraiser for Facebook. Yesterday it was forced to exclude US investors from the private offer of new shares in the social networking site because the media hype surrounding it was likely to breach Wall Street rules on such deals. An internal review into its business practices last week - aimed at cleaning up its reputation for acting occasionally in its own interests rather than those of its clients' - resulted in Goldman revealing for the first time how much it makes investing its own money.

It made revenues of $1.9 billion on its own account in the three months to 31 December - up 45% on a year earlier as opposed to $3.6billion (down 31%) it made from trading and other services on the clients' behalf.

Three-monthly figures showed that fourth-quarter net income fell to $2.4 billion from $4.95 billion a year earlier - bang in line with Wall Street expectations.